Find this line in widgets.php
$cat_args = “orderby=name&show_count={$c}&hierarchical={$h}”;
and add the &exclude= to the end of it, eg. to exclude cat’s 1, 2 & 3
$cat_args = “orderby=name&show_count={$c}&hierarchical={$h}&exclude=1,2,3”;
It would be better to copy the category widget code and make a seperate widget with the exclude as an option tho and include it in your template. I’m not sure why this feature is left out as standard though because the page widget has it.